We study the choice between public and private debt in a firm’s marginal financing decision and its effects on corporate investment. To do so, we build a dynamic model of investment and financing decisions in which firms can choose not only the amount but also the type of debt to issue to finance investment. The paper shows how various firm and industry characteristics, such as liquidation cost...

We model the capital structure choice of a firm that operates under imperfect competition. Extant literature demonstrates that debt commits a firm to an aggressive output stance, which is an advantage to the firm under Cournot competition. Empirical evidence, however, indicates that debt is, in fact, a disadvantage under imperfect competition. We reconcile the theory with the evidence by incorp...

Contrary to the predictions of standard economic theory, capital market liberalization has been a mixed blessing for many countries. Liberalization of debt inflows exposes economies to the risk of crises stemming from sudden changes in investor sentiment. Equity market liberalizations, on the other hand, have promoted growth in almost every liberalizing country. Yet equity market liberalization...

Structured Abstract Purpose Subordinated debt regulatory proposals assume that transactions in the secondary market of subordinated debt can attenuate moral hazard on the part of management if secondary market prices are informative signals of the risk of the institution. Owing to the proprietary nature of dealer prices and the liquidity of secondary transactions, the practical value of informa...

This paper examines the capital structure implications of market timing. I isolate timing attempts in a single major financing event, the initial public offering, by identifying market timers as firms that go public in hot issue markets. I find that hot-market IPO firms issue substantially more equity, and lower their leverage ratios by more, than cold-market firms do. However, immediately afte...

Peer-to-peer lending is a new highly liquid market for debt, which is rapidly growing in popularity. Here we consider modelling market rates, developing a nonlinear Gaussian Process regression method which incorporates both structured data and unstructured text from the loan application. We show that the peer-to-peer market is predictable, and identify a small set of key factors with high predi...

This study test the impact of financial markets development on capital structure of firms listed on Ho Chi Minh stock exchange (HOSE). Base on the financial data of 116 firms listed on HOSE, in the period from 2009 to 2015 and generalized least square regression method, this study shows that market capitalization is positive relationship with debt rate in capital structure, volume of shares tra...

Are disruptions of the mortgage market a consequence financial imbalances accumulated in past? In this paper, we study effects positive and negative credit supply (CS) shocks on subsequent household defaults debt over last four decades U.S. states. We apply sign restrictions within VAR framework to isolate state-level CS shocks, identify that 1984 2004 were years systemic, countrywide, whereas ...

Credit card default losses increased dramatically in the 80s and 90s, from 3% to over 5% of outstanding debt. We explore whether technological progress in debt collection is behind this change by developing a new theory featuring costly state verification with signals. We motivate our approach by the predominance of informal bankruptcy in the credit card market, which necessitates the costly in...